A provocative, unsponsored assessment of current and future legal, regulatory, marketplace, and cultural issues affecting telecommunications and information policy presented by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law, Penn State University

Wednesday, April 7, 2010

The FCC’s attempt to sanction Comcast for interfering with subscribers’ peer-to-peer traffic absent legitimate network management requirements failed to pass muster with the D.C. Circuit Court of Appeals. [1] This decision severely sidetracks the Commission’s attempt to establish binding network neutrality policies, rules and regulations absent an explicit legislative mandate.Noting that the Commission invoked no express statutory authority, the court considered whether “barring Comcast from interfering with its customers’ use of peer-to-peer networking applications is ‘reasonably ancillary to the . . . effective performance of its statutorily mandated responsibilities.’” [2] Notwithstanding the Supreme Court’s broad deference to the FCC’s assertion of ancillary jurisdiction in the Brand X case, [3] where the Court affirmed the FCC’s determination that cable modem provided Internet access constitutes a lightly regulated information service, the D.C. Circuit required evidence that the FCC’s regulatory action had a direct link to its statutorily mandated responsibilities. [4] The court vacated the FCC’s sanctioning order of Comcast based on the view that the FCC could only refer to congressional statements of policy which do not provide a precedent for creating such responsibilities and to various section of the Communications Act that the court deemed inapplicable for substantive and procedural reasons.

The D.C. Circuit vacated the Commission’s reprimand of Comcast based on the court’s refusal to accept the Commission’s claim of ancillary jurisdiction. The court referred to the three major cable television cases [5] where the Supreme Court had affirmed the FCC’s ancillary jurisdictional claim “at a time when, as with the Internet today, the Communications Act gave the Commission no express authority to regulate such systems.” [6] As it had done in the case rejecting the FCC’s attempt to require television set manufacturers to build units capable of processing digital right management, “broadcast flags,” the court distilled the precedent for ancillary jurisdiction established by these cases into a two part test whether: “(1) the Commission’s general jurisdictional grant under Title I [of the Communications Act] covers the regulated subject and (2) the regulations are reasonably ancillary to the Commission’s effective performance of its statutorily mandated responsibilities.” [7] The court determined that the FCC had not satisfied the second part of the test. [8]

The court flatly rejected the FCC’s attempt to infer congressional intent for the Commission to extend its regulatory wingspan to include Internet access. In a series of references to provisions of the Communications Act, [9] the Commission expansively read congressional policy as sufficient ground for undertaking regulatory policy:

Instead, the Commission maintains that congressionalpolicy by itself creates “statutorily mandated responsibilities”sufficient to support the exercise of section 4(i) ancillaryauthority. Not only is this argument flatly inconsistent withSouthwestern Cable, Midwest Video I, Midwest Video II, andNARUC II, but if accepted it would virtually free theCommission from its congressional tether. [10]

The court concluded that the FCC could invoke ancillary jurisdiction to apply any number of regulatory requirements to cable modem provided Internet access without explicit congressional authority to do so. [11]

[3] The court does not interpret the Brand X case as precedent for the imposition of plenary authority over any matter involving cable television company provided Internet access. “By leaping from Brand X’s observation that the Commission’s ancillary authority may allow it to impose some kinds of obligations on cable Internet providers to a claim of plenary authority oversuch providers, the Commission runs afoul of Southwestern Cable and Midwest Video I.” Id. at 14. “The Commission’s exercise of ancillary authority over Comcast’s network management practices must, to repeat, ‘be independently justified.’” Id. at 16, citing National Ass’n of Regulatory Utility Commissioners v. FCC, 533 F.2d 601, 613 (D.C. Cir. 1976)(rejecting the FCC’s preemption of state and local regulation of two-way, intrastate, non-video cable transmissions).

[4] “The Commission therefore rests its assertion of authority over Comcast’snetwork management practices on the broad language of section 4(i) of the Act: “The Commission may perform any and all acts, make such rules and regulations, and issue suchorders, not inconsistent with this chapter, as may be necessary in the execution of its functions,” Id. at 6, citing 47 U.S.C. § 154(i) and In re Formal Compl. of Free Press & Public Knowledge Against Comcast Corp. for Secretly Degrading Peer-to-Peer Applications, 23 F.C.C.R.13,028, 13,036, (2008).

[8] The court noted that Comcast had conceded “ that the Commission’s action here satisfies the first requirement because the company’s Internet service qualifies as “interstate and foreign communication by wire” within the meaning of Title I of the Communications Act.” Id. at 7-8 citing 47 U.S.C. § 152(a). The court also rejected the Commission’s claim that because Comcast had used the existence of FCC jurisdiction in another case the company should be judicially stopped from challenging the Commission’s jurisdiction now. The court interpreted Comcast’s position in the other case as simply acknowledging the FCC’s jurisdiction over wire and radio services, which includes what Comcast offers. “Because Comcast never clearly argued in theCalifornia litigation that the Commission’s assertion of authority over the company’s network management practices would be ‘reasonably ancillary to the Commission’s effectiveperformance of its statutorily mandated responsibilities’ (American Library’s second requirement), 406 F.3d at 692,that question remains for us to answer.” Id. at 12.

[11] “Were we to accept that theory of ancillary authority, we see no reason why the Commission would have to stop . . [at imposing regulation of Internet Service Providers’ rates] for we can think of few examples of regulations that apply to Title II common carrier services, Title III broadcast services, or Title VI cable services that the Commission, relying on thebroad policies articulated in section 230(b) and section 1,would be unable to impose upon Internet service providers.” Id. at 23-24.

About Me

Rob Frieden serves as Pioneers Chair and Professor of Telecommunications and Law at Penn State University.He also provides legal, management and market forecasting consultancy services and has written four books, most recently Winning the Silicon Sweepstakes: Can the United States Compete in Global Telecommunications published by Yale University Press. Rob has written over one hundred articles in law reviews and telecommunications policy journals and has provided commentary in a variety of trade periodicals. He updates a major communications treatise: All About Cable and Broadband (Law Journal Press).

Rob has held senior policy making positions in international telecommunications at the United States Federal Communications Commission and the National Telecommunications and Information Administration.In the private sector, he practiced law in Washington, D.C., and served as Assistant General Counsel at PTAT System, Inc. where he handled corporate, transactional and regulatory issues for the nation's first private undersea fiber optic cable company. Professor Frieden holds a B.A., with distinction, from the University of Pennsylvania (1977) and a J.D. from the University of Virginia (1980).